Centamin eyes big African land position with Ampella bid

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2013-12-18

VANCOUVER — Gold producer Centamin (TSX: CEE; LSE: CEY; US-OTC: CELTF) has been searching for exploration upside in West Africa, and it looks like the company found a fit in Australian junior Ampella Mining (ASX: AMX; US-OTC: APMZF) and its portfolio of assets that occupy 3,500 sq. km along the border of Burkina Faso and Côte d’Ivoire.

On Dec. 10 Centamin announced a takeover off that values Ampella at US$36 million. Ampella shareholders would receive one Centamin share for each share held, which equates to US14.65¢ per share, or a 113% premium, based on the companies’ closing share prices at the time of the deal.

Centamin also locked up a pre-bid acceptance agreement with Taurus Funds Management, which is Ampella’s largest shareholder with an 18.9% stake.

Ampella’s flagship project is the resource-stage Batie West property, 450 km southwest from Burkina Faso’s capital of Ouagadougou near the Côte d’Ivoire border. Batie West encompasses 2,350 sq. km and occupies a 150 km, gold-bearing shear zone along the southwest margins of the Boromo greenstone belt.

In March Ampella released an updated resource — under Joint-Ore Reserves Committee standards — on Batie West’s Konkera deposit that transitioned 95% of the project’s in-situ gold into the indicated category. The estimate incorporates five contiguous prospects across a 5 km strike, including: Konkera East, Konkera Main, Konkera North, the Gap and Kouglaga.

Ampella had been scoping work on a 3-million-tonne-per-year, carbon-in-leach operation at Konkera that would have produced 150,000 oz. gold per year, but Centamin will undertake more exploration before updating the mine plan.

In 2012 Ampella consolidated its Batie West land position by applying for three permits over 1,200 sq. km in Côte d’Ivoire. The company announced the results of early surface sampling across three prospects — Doropo West, Varale and Kalamon — in October, with 52.9 grams gold, 44.5 grams gold and 26.9 grams gold in chip samples.

Ampella focused its reconnaissance work on artisanal workings, and reported that gold mineralization appeared to be associated with multiple parallel sets of shallow dipping, brittle fracture zones in granitoids that host laminated quartz veins with strong pyrite–sericite alteration selvages.

BMO Capital Markets analyst David Haughton, who has a “market perform” rating on Centamin, along with a 95¢ price target, notes that “the opportunistic transaction does not come as a surprise, and although slightly dilutive, remains relatively immaterial when compared to [Centamin’s] liquidity and market capitalization. The main rationale is the significant exploration upside.”

Centamin’s chairman Josef El-Raghy explained in a release that the company was looking to make an “exploration drive” into a “stable and attractive destination for mining investment,” with potential for near-term resource expansion. Centamin’s exploration assets before the deal were four early stage licences in Ethiopia’s Tigray region.

The company has been grappling with political uncertainty at its Sukari gold mine in Egypt over the past few years, and reported US$43 million in earnings during the third quarter. Centamin has traded within a 52-week window of 41¢ and $1.04, and closed at 78¢ per share at press time. The company has 1.1 billion shares outstanding for an $870-million market capitalization.

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